Earnest Money In Sacramento: What Buyers Should Know

Is your offer strong enough to stand out in Sacramento’s market? One simple piece can make a big difference: your earnest money deposit. If you are a first-time buyer or relocating to the area, knowing how earnest money works can help you write a confident offer and protect your budget.

In this guide, you will learn what earnest money is, typical amounts in Sacramento, when to deposit, how contingencies protect you, and how to avoid wire fraud. You will also get simple checklists and a step-by-step flow from offer to close. Let’s dive in.

What earnest money is

Earnest money, also called a good faith deposit, shows the seller you are serious about buying. After your offer is accepted, you deliver the deposit to the escrow company named in the purchase agreement. The escrow holder keeps it safe and follows written instructions.

At closing, your deposit is credited toward your cash to close. That can include your down payment, purchase price balance, or closing costs. If the deal does not close, the contract decides who receives the funds.

Why it matters in Sacramento

A strong earnest money deposit can help your offer stand out, especially when inventory is tight or a home receives multiple offers. It signals commitment to the seller in the short term. It can also provide partial compensation to the seller if a buyer cancels without a valid contingency.

Sacramento is a large metro with varied neighborhoods and price points. Expectations for deposit size can shift with market conditions and property type. Your agent and escrow officer can advise on the current norm for your specific price bracket and area.

How much to deposit

A common benchmark in many markets is 1 to 3 percent of the purchase price. For some lower-priced homes, buyers offer a few thousand dollars. For higher-priced homes, the deposit is larger in dollar terms even if the percentage is similar.

Use these tips to set your amount:

• Start with 1 to 3 percent as a general range, then adjust to your situation.
• Increase the amount if the home has multiple offers or if a stronger signal of commitment could help you compete.
• Keep your risk tolerance in mind. A higher deposit raises your financial exposure if you cancel after removing contingencies.
• Align with your lender’s documentation needs. You will need to show the source of funds for underwriting.

When and where to deposit

Your purchase agreement sets the timeline. In many transactions, buyers deliver funds within 24 to 72 hours after offer acceptance. Always follow the exact deadline in your contract.

In California, deposits usually go to the escrow company listed in the agreement, or in some cases a broker trust account. Ask your agent for the wiring or delivery details, and always get a receipt from escrow.

Contingencies that protect you

Contingencies allow you to cancel within specific timelines and keep your earnest money if certain conditions are not met. Common protections include:

• Inspection contingency. You can inspect the home and, if needed, cancel within the inspection period.
• Loan contingency. If your loan is not approved per the contract terms, you can usually cancel and keep your deposit when you give notice on time.
• Appraisal contingency. If the home appraises below the contract price and both sides cannot agree on a solution, you can cancel within the appraisal deadline.
• Title and disclosures. If title issues or major undisclosed problems arise, you may cancel under the contract’s title or disclosure terms.
• Home-sale contingency. If you need your current home to sell first, this clause allows cancellation if your sale does not close by the agreed date.

If you remove contingencies to strengthen your offer, your risk goes up. Canceling after removal may be treated as a breach, and the seller may claim the deposit. To protect yourself, follow timelines, give written notices on time, and keep records.

If the deal falls through

What happens to your deposit depends on why the deal did not close:

• You cancel within a valid contingency window. Your earnest money is typically refunded in full.
• You cancel after removing contingencies or miss deadlines. The seller may claim the deposit as damages under the contract.
• The seller fails to perform. You may receive your deposit back and could pursue other remedies under the agreement.

If there is a dispute, escrow usually holds the funds until both parties sign a release or a court or arbitrator directs distribution. Keep your documentation organized in case a disagreement arises.

Picking the right amount in Sacramento

Choosing a deposit is part strategy and part risk management. Here is a simple approach:

1. Gauge competition. Ask your agent about recent offer activity in the neighborhood and price point. Tight inventory often pushes deposits higher.
2. Match your deposit to the home’s price. Use 1 to 3 percent as a baseline and adjust for market conditions.
3. Balance risk and reward. A larger deposit can strengthen your offer but increases exposure if you cancel without protection.
4. Confirm with your lender. Be ready to document the source of funds to meet underwriting rules.

Wire transfer safety tips

Wire fraud is a real risk in real estate. Protect your funds with these steps:

• Verify wire instructions by calling your escrow officer using a known phone number. Do not rely only on email.
• Confirm the escrow company’s name, address, and the last four digits of the account by phone before sending funds.
• Consider a cashier’s check delivered to escrow if you prefer not to wire.
• Do not click links or open attachments in unexpected emails about wiring. If anything looks off, call your escrow officer immediately.

Your first 72 hours after acceptance

Moving fast keeps your options open and your deposit protected:

• Deliver your earnest money to escrow within the contract deadline and save the receipt.
• Schedule your home inspection right away.
• Submit all loan documents to your lender and order the appraisal as directed.
• Track all contingency dates on a calendar and set reminders.
• Keep every document in one folder: escrow receipt, inspection report, lender notices, appraisal, disclosures, and written notices.

Step-by-step: from offer to close

Offer accepted
     |
     v
Buyer delivers earnest money to escrow (per contract timeframe, commonly 24–72 hours)
     |
     v
Escrow issues receipt (buyer keeps copy)
     |
     v
Contingency period(s) active: inspection, loan approval, appraisal, title review
     |
    / \
   /   \
If contingencies satisfied/removed -> proceed to closing -> earnest money credited at closing
   \
    \
If contingency exercised (timely) -> buyer cancels -> escrow returns earnest money
   \
    \
If buyer breaches after removing contingencies -> seller may claim earnest money; escrow holds funds until mutual release or dispute resolution

New construction notes

Builders may use different deposit rules. Some require larger or staged deposits, with separate timelines. Ask for the builder’s escrow and refund terms in writing before you sign, and confirm how those terms interact with your financing and appraisal.

Quick checklist for buyers

• Choose a deposit aligned with local norms and your risk tolerance.
• Deliver funds to escrow by the contract deadline and save the receipt.
• Start inspections, loan steps, and appraisal immediately.
• Track deadlines and give all notices in writing.
• Verify wire instructions by phone before sending any funds.
• Keep all records until after closing.

Buying in Sacramento should feel clear and manageable. If you want step-by-step guidance, local context for deposit norms, and hands-on support through escrow, reach out to the team at Sankaran and Associates, Inc. We are here to help you write a strong offer and protect your earnest money.

FAQs

What is earnest money in Sacramento home purchases?

• It is a buyer’s good faith deposit held by escrow after offer acceptance, later applied to your cash to close or refunded based on the contract.

How much earnest money should I offer in Sacramento?

• Many buyers use 1 to 3 percent of the purchase price as a starting point, adjusted for competition, price point, and risk tolerance.

When is earnest money due after my offer is accepted?

• Your contract controls the deadline, and in many transactions buyers deposit within 24 to 72 hours of acceptance.

Is earnest money refundable if I cancel?

• If you cancel within valid contingency periods and follow notice rules, it is typically refunded; after removing contingencies, you risk forfeiture.

Who holds my deposit in California?

• The escrow company named in your purchase agreement typically holds the funds, or in some cases a broker trust account, and will issue a receipt.

How do I avoid wire fraud when sending earnest money?

• Call your escrow officer using a known phone number to verify instructions, avoid acting on unexpected emails, and consider a cashier’s check if preferred.